Kitzhaber calls lawmakers to Salem for special session

SALEM — Gov. John Kitzhaber on Monday called lawmakers back to Salem to work on legislation that would reduce costs in the public employee pension system and raise new revenue.

By JONATHAN J. COOPER

SALEM — Gov. John Kitzhaber on Monday called lawmakers back to Salem to work on legislation that would reduce costs in the public employee pension system and raise new revenue.

Kitzhaber's proclamation said the special session would begin at 8 a.m. Sept. 30. He has previously said he hopes the session will last just one day, but it could continue if lawmakers struggling to work out details or gain enough support for the proposals.

Monday's action formalizes a plan Kitzhaber announced last week, when he said he had worked out an agreement on pensions with House and Senate leaders from both parties.

Under the deal, public employees would get smaller annual inflation increases in their retirement checks. Combined with cuts in the cost-of-living adjustment enacted earlier this year, the changes would erase $4.6 billion from the Public Employees Retirement System's unfunded liability and reduce the amount that state and local governments, including school districts, are required to contribute.

The improving economy has boosted tax collections at state and local governments, but much of the additional revenue has had to cover steep increases in pension costs because of massive investment losses during the Great Recession.

PERS members say their pensions are a contractual obligation and are vowing to challenge cuts in court.

The deal also would raise $240 million in new revenue. It would include higher cigarette taxes, an increase in some corporate taxes, and a limitation on a tax deduction for seniors' medical expenses.

Some businesses known as pass-through corporations, which are taxed on their owners' individual income tax returns — would pay a lower tax rate. Republicans who pushed for the change said it would spur job creation, but liberal groups worry it will create a tax loophole for the wealthy.

Certain agricultural exporters also would pay a lower tax rate.

To sweeten the pot for Republicans, many of whom are reluctant to vote for higher taxes, the deal also would include a bill prohibiting local governments from regulating genetically modified crops. A ballot measure already planned in Jackson County would be allowed to stand if voters approve.